tv The Kudlow Report CNBC January 24, 2013 7:00pm-8:00pm EST
all right. i want apple higher. my charitable trust owns it. they've got to do a deal, big buyback, huge boost in the dividend. they've got to make that cash hoard work for you if you're a shareholder, and then it's fine. it's not fablulous, but it's fine. i'm jim cramer and i will see you tomorrow. good evening. i'm larry kudlow. this is the kudlow report. you know we learned today in this solid bull market apple doesn't run the market. even with its crash the dow managed to rise and the s&p 500 was flat. this by itself was very bullish and is part of our still bullish theme here. there was drama in washington, d.c. also, senator diane feinstein declares a goal to dry up the supply of weapons over time. she wants to immediately ban 150 types. she may as well ban the second
amendment while she's at it because this is an outrageous over the top stuff. i don't believe it. i'm kudlow. this is the kudlow report and we begin right now. >> first up, old time market highs in sight. the dow iing closer to the 14,000 market. s&p 500 also closing ever so slightly in the green to secure its first seven day winning streak since october 2006. apple took a major bite out of today's market rally. it drops 63 bucks or roughly 12% but it didn't derail the whole market or that unappreciated bull trend that want continues to get no respect. we have rebecca patterson, barry knapp and brian kelly, the
co-founder of sell terrify harbor capital. brian kelly, let me begin with you. why doesn't apple bring down the entire market? what's your quick take on this? >> apple is down 25% or 20% before today. so a lot of what happened today was probably priced in to the broad market. so i think that's why it didn't really do it today. it certainly could and certainly could have a drag on the market. someone was a bit stock specific too in that their growth isn't going to be what it used to be. >> and competition. >> there's competition. >> from samsung. a lot of people are criticizing apple for its execution, some of these new products are not panning out. i don't want to get too in the weepds but it's not-- weeds, bu perfect picture. >> remember how we thought about apple a year ago. we said never since microsoft in 1999 have we had a single stock contribute 10% to a 10% market
rally. turned out that was top tick for apple and we weren't making a fundamental statement. look it had become as we were discussing before a bit of a cult stock. my broader issue here is tech in general i think looks attractive but the enterprise of tech, the capital spending part of tech, tech spending was depressed. capital spending was depressed last year because of public policy uncertainty. we think that's going dissipate through the year. the consumer is in a worse spot primarily because of tax hikes. supply side economics, right. so apple is a consumer company for the most part and i think that any consumer company will struggle. >> that's an important point. let's follow that point. is part of this apple drop weakness in consumer spending or expected weakness, or is it, in fact, the competition from samsung and the fact that the company is not executing. in other words is it a company story, an economics story, what
is it? >> there's a lot of company specific stuff going on just comparables this quarter versus a year ago. that's part of it. it's a maturing company to a degree. it's going through its growth phase. now getting into the phase which hopefully will last a long time you focus on return on invested capital. that could be fine. the market has to adjust to that perception. i think the consumer point is a good one. is the consumer going retrench with higher taxes and we see the jobless claims out the last few weeks -- >> coming down. >> they are looking great. >> is it seasonal or real. we won't know that for a few more weeks >> you're probably right. i want to say one thing on the consumer weakness. retailers are doing great. okay. today the s&p retail index up substantially, let me see, up 2% today. the retail index was up 2% today. 7% year-to-date. i got some other sectors that i will get to later.
what is that all about? that tells me the consumer -- that tells me payroll tax cut never worked because it was a temporary rebate and bringing it back won't help. retailers are huge today. >> huge year-to-date. >> look what happened to consumer credit. we're at all time highs in consumer credit. consumers have sold off some financial asset, whether it be some parts of their house, deleveraged a bit but ramped up their borrowing particularly in autos is a big part it. >> cars. >> even take that -- >> sales. >> even take that out you have an uptick in consumer credit. at a two standard deviation from the trend and you're getting tax increase, your dispose squabl income is going down. >> that's why you have to have the jobs. tax hurts the consumer if the job story is real and we have a slight uptick. >> payroll tax is not -- the taxes on upper end people will hurt. that's incentives for those who invest. trust me on this. payroll taxes are nothing more
than temporary tax cut was a rebate. like bush had two rebates that didn't work. obama had two rebates that didn't work. people know it's not permanent and pay down their credit cards but doesn't affect spending. got to go. hang on. when we come back you can whack at me. we got two major earnings reports out after today's close bell. we begin with microsoft, john joins us with the details. >> reporter: microsoft turned in solid results. revenue just a little bit short of expectations at 21.46 billion dollars. eps a penny better at 76 cents. microsoft says when you count deferred revenue thing are actually a little bit better than that. a couple of highlights. windows, the windows group did better than expected at 5.8 billion in revenue. the business division did a little shy at 5.7. now jane wells has a little bit on starbucks, another big
company. jane? >> reporter: john, shares have been up after hours. they were up over 3% at one point. starbucks reported its best holiday ever, best earnings per share ever at 57 cents. improving operator margins to 16.6%. stronger comp sales in the u.s. and china and the company says the turn around in europe is under way. but the ceo was most energized on a call talked about the launch of single serve coffee machines. we're deeply dmoibtd leader in this space. watch out green mountain. >> with more than 150,000 machines sold since launch, it's off to an exceptional start as we build, enhance and expand what we're confident to be a multibillion dollar premium single serve platform in the months and years ahead. >> reporter: starbucks also says falling coffee prices have more than offset rising dairy costs.
it could be attributed to better commodity price. that's expected to continue for a net benefit of $100 million. it's projecting a repeat 100 million benefit. >> jane, the consumer is suffering so much. all these people around the table are telling me consumers suffering because of the payroll tax hike. they are out there buying espresso, buying starbucks that's expensive coffee. what's going on here? >> well also they are buying these $200 to $400 coffee machines. 150,000 of them they sold. i guess not only were sales up in terms of traffic in the u.s. but the average ticket was up 2%. so not only are more people going in and buying but they are spending more at starbucks. maybe it's the little things they want to splurge on. >> the little thing. anyway many thanks, jane wells. my favorite double espresso red eye. let's bring back our panel.
you're the bear on consumers. how come the starbucks is doing so well >> starbucks numbers hit expectation, so, you know, you always after your i d-- have yo stories. here's my view on that payroll tax cut by the way. i think you're right that it was poor policy, bad policy, temporary and timely. i think all you effectively did on the way in you had a about it of a ricardan equivalence you transferred house hold debt to the public sector. on the way out, the way the consumer particularly the low end consumer has responded to cash flow impairments during this recovery and by the way i disagree on consumer credit. if you take student loans out consumer credit is flat. in that environment where credit is not expanding where you had cash flow impairments you've had a one quarter delayed significant reaction.
>> i'll give you a maybe on that. i'll give you a maybe on that. here's what i want to talk about also. brian kelly, transports, transports, 1.7% up today. 10% up year-to-date. i'm very old-fashioned. i like the dow theory. if the dow is rising and the transports rising. what does that mean? to me that's bullish for the economy. >> if you look at some of the trucking names. normally take out the airlines. the airlines have done quite well if they reduced capacity although if you look at some of the reports i think it was u.s. air, but i believe they said that some of their seats were down a bit even though they cut capacity. that was a little bit of a warning sign. even on trucking side it was okay. but now as a trader and investing in the market you have to hook six months ahead. what will happen coming down. we know everything is done well. we know they are up 7%.
what's the next move. that's where you get concern. >> we look at the leading indicators. pmi from china, europe, u.s. today the leading indicators in that sentiment indicator is telling us we're not done. we could bleed higher in terms of economic sentiment and economic activity and the new orders component the global pmi looks like it will print above 50 in january for the first time in eight months. >> i'm sure there's a stock market correction. >> when? >> the stock market among other things including what you just described, we'll have some charts on it, the economy is little better than we think. not drawing 5% or 6% but could be 2.5%. home builders. home builders year-to-date up 12%. they won't stop. retailers, dow transport, home builders. all these are pro growth. may i add a couple of things year-to-date. again consumer discretionary we'll call those retails. industrials up ever 6% so far.
energy up over 6.5%. materials 5.5%. every one of those have economic growth written on them. >> right. the way we got back to the equity market valuation we're at which is the same peak we achieved twice in 2012, it was partially discretionary and financials but it's china, industrials and materials that's through their peak expectations. you have to ask yourself if you have a slow down in consumer demand, china is still incredibly export leveraged. we have very difficult time interpreting china data -- >> tax hikes are in. people know about the tax hikes and still buying these cyclical retail house building stocks. they know this and buying. why is that? >> we started out the year and we were going to achieve an escape velocity. by the second quarter we were in a new normal. by summer --
>> people aren't looking for three. you think the market is pricing in at three? you think so. >> 2.5. i got to go. i give the last word. >> there are several warning signs out there from a trading perspective. australian daughter. china doing so well why isn't the australian dollar ripping. citi, economic surprise index dropping below zero. that means it's priced in to the market. over the last three years every time it's dropped below zero you had about a 10% correction. it's probably more of a positioning. >> that's a good point. i think the market is having a great run. i think there will be a correction. the economy may grow at 2.5 instead of that boring 2%. thank you all very much. now the mantra we heard from the left and news media for all these years are talking about the shrinking middle class. it is really true? new numbers out today casting
serious doubt on this lefty liberal dogma and we'll debate it all. later in the show it's day nine for the worldwide grounding of the boeing 787 dreamliner. they still don't know what's causing these battery fires. this is not a pr problem this san airplane problem. we'll hear from former united airlines chief. free market capitalism is the best path to prosperity. if washington doesn't screw it up we might have a better year in the economy. i'm larry kudlow, we'll be right back. [ man ] ring ring... progresso
this reduced sodium soup says it may help lower cholesterol, how does it work? you just have to eat it as part of your heart healthy diet. step 1. eat the soup. all those veggies and beans, that's what may help lower your cholesterol and -- well that's easy [ male announcer ] progresso. you gotta taste this soup. .
did you know that middle class americans actually have more buying power today than ever before. this according to well-known economics professors. they totally debunk the leftist view that somehow taxing or punishing or redistributing the wealth of the rich will then middle class that may not need then. the lefties full of nonsense. it's a bunch of nonsense. here's robert rice former labor secretary and author of the book "beyond outrage."
and jimmy is here. when you look at the study, you've done a lot of work on this. when you look at lifestyle, benefits in lieu of wages the middle class has done a whole lot better than some people would have us believe. >> even before you begin to get into the data at a surface level do you really think that the average american, the lifestyle, our standard of living is no better than it was 30 years ago or 40 years ago? who would want to go and live the average life of the average american back then? whether it's quality of medical care, whether it's technology, no one would. on top of that the data which i'm sure bob will talk about is completely wrong. wages have not stagnated 30 or 40 years. they are up 30% or 40% over that period. numbers in the media are wrong and i'm more than happy they talk about them. >> robert reich, don't this. you can buy greater, better
houses today. no matter how rich you are you can still have the same cell phone as somebody in the middle class, same ipad as somebody in the middle class, longer life x expe expectancy. >> no doubt. technology has made our live better. so in many respects life is better. but some of the technical discussion has to do with the deflator, inflation index we're using. it is accurate? is it capturing all the benefits of technology and all of the benefits of globalization? i think the answer is obviously no but at the same time there are certain things the middle class spends right now or at least tries to buy such as college education, health care, many things that are more costly today than they were 30 years ago. it's very, very difficult. you're almost measuring or comparing apples and oranges. >> are you then conceding all
the people say wages have been stagnant for 30 or 40 years that that number is wrong. >> no, no, it's not absolutely wrong. i'm saying that there's a big debate over the deflator, what we're using to measure real incomes and inflation adjusted incomes and the debate centers on whether technologies are accurately included in all of that. >> if you have that number wrong, then the argument falls apart. so instead of having flat wages which by the way doesn't take into account the full compensation someone gets such as fringe benefits but focusing on the wages if that part of the argument is wrong then whole thing is wrong. >> wait, wait, wait. wait, wait, wait that's not all wrong. >> if i could finish my point please. the actual number is between 30% and 40% over that period not flat therefore your argument and the argument of the left and
center people collapses. >> first of all, can i just say, all these labels left and left of center and liberal, let's just get beyond labels and talk to each other, please. let me just say education costs, health care cost, co-payment, deductibles all of the other things the middle class pay for much higher than they were 30 years ago. so there is an interesting debate going on. i'm not saying -- i think that the people who were saying that is your economic analysis, bureau of labor statistic, most economists who looked at this matter, most people do believe wages are relatively stagnant in real terms over the past 30 years. i'm just admitting there's a good debate and an interesting debate. >> what i would say, bob, is this i tend to take jimmy's point of view on this. i think the middle class is in better shape. no question we need more growth. no question we need more jobs. no question we need more wages and incomes in the country.
that's not the issue. i'm just saying the picture painted by many of your colleagues is so grim that you arrive let's tax rich people and somehow that will help the middle class. i don't think the middle class is dying and i don't think taxing those likely to invest will help. >> here's the issue. i don't think redistribution is the answer. i think the rich would do better with a smaller share of a rapidly growing pie and the pie is rapidly growing because people have more money. than a large share of a pie that's stagnant. i think one of the reasons that the american pie is growing so slowly is because the middle class really doesn't have the purchasing power it needs to absorb all of the new goods, all of the services, all of the productivity and improvements we have in the economy. we can have a debate over inflation until we're red in the face. >> this is a demand issue. i think there's supply side issue with tax code, education system, not bringing enough high
school immigrant, entrepreneurs, even though i don't think wages have stagnated we should act as they have. >> we want to make the pie bigger for everybody. that's the bottom line. i got to leave it here. thank you both. we appreciate it. now, i have even more bad news for robert reich. i'm about to look at two pieces of our private enterprise economy. so much for gloom and doom. that's next up. so, we all set? i've got two tickets to paradise!
pack your bags, we'll leave tonight. uhh, it's next month, actually... eddie continues singing: to tickets to... paradiiiiiise! no four. remember? whoooa whooaa whooo! you know ronny, folks who save hundreds of dollars by switching to geico sure are happy. and how happy are they jimmy? happier than eddie money running a travel agency. get happy. get geico. fifteen minutes could save you fifteen percor more.
officemax can help you drive supply costs down... and down. use your maxperks card and get a 10-ream case of officemax multiuse paper for just 4.99 after maxperks rewards. find thousands of big deals now... at officemax. this reduced sodium soup says it may help lower cholesterol, how does it work? you just have to eat it as part of your heart healthy diet. step 1. eat the soup. all those veggies and beans, that's what may help lower your cholesterol and -- well that's easy [ male announcer ] progresso. you gotta taste this soup.
on the economy, just please color me moderately bullish for the year not a roaring bull but i think moderately bull. instead of 2% we might get 2.5% if washington doesn't do any more damage. let me give you a couple of recent economic releases. first jobless claims are coming down substantially. they are down on a weekly basis to 330,000. look at that chart carefully after the bump up from hurricane sandy, it came right back down. that's a good sign that people are not getting fired. and second, an underrated index, the index of leading economic indicators. you saw the slump, that slump was around the middle the year as the whole economy was worrisome but look how well it's come back towards the back end the year. that i think is part of the scenario that we'll grow faster than we have. look at house, retail sales,
look at manufacturing, look at other indicators, they've ended the past year pretty good and they are starting the new year pretty well, 2.5%, it ain't the greatest i rather have 5%. leapt us move on. big day for democratic senator diane feinstein. ban 150 types of hand guns and rifles. over time dry up the entire supply of weapons. while she's at it she forgot say that she's in complete violation of the second amendment. this is over the edge stuff with all due respect to miss feinstein. we'll be right back to cover it.
. welcome back to "the kudlow report." i'm larry kudlow. in this half hour you can say we didn't warn you. senate democrats are finally promising to roll you want a budget. but it's mainly tax hikes, no serious spending, no serious deficit reduction and not pro economic growth. keep dreaming on that one. speaking of dreams. the 787 treatment liner can't wake up from the nightmare.
still grounded and no end in sight. when does this start to really take a bite out of boeing. this is not a pr problem, this is an airplane problem. now, almost six weeks after the heinous mass murder in newtown, connecticut senator diane feinstein unveiled an off the chart over the chart outrageous violation of the second amendment pandemic she wants to ban 150 types of firearms and eventually end the supply of all weapons. she says she's ready for the fight. take a listen. >> we have had enough. these weapons do not belong on the streets of our towns, our cities, in our schools, in our mall, in our workplaces, in our movie theaters. enough is enough. we can win this. >> all right. the nra, however, says not so fast saying in a statement this afternoon quote senator feinstein has been trying to ban guns from law-abiding citizens
for decades. they add the american people know gun bans do not work and we are confident congress will reject senator dianne feinstein's wrong-headed approach. right here we'll debate. let's go to our cnbc contributor and author of "divider in chief" and kay bailey hudson. i was reading former new york police chief bill braddon who thinks the gun ban is crazy. there's 350 million firearms out there, including assault weapons. you think this feinstein approach has a chance? >> well, i think that harry reid gave you the signal that it's going to be very difficult because he said i'm not bringing up anything in the senate that isn't going pass in the house. because he has vulnerable democrats who are up for
election in 2014 that are in states that value their guns, and i think that it's going to be very difficult. and i also think republicans are looking at other issues like violence in the movies, violence on these video games and that it's a culture thing that has to be talked about and a part of the debate as well as just always focusing on the limitation of guns. >> including mental health care and issues related to that. i want to get to the other side of the aisle here. i think this is complete disregard for the second amendment. this is like a bombshell. in fact i don't even think the white house will back this. >> i don't know whether the white house will back it. as a lawyer i don't think it violates the second amendment even under the heller decision which provides a more individual rather than collective right. the nature of the firearms has always been the question here. i take the senator's point that
we may not see action on this in the short term. if you're asking me what is good policy, yes we keep grenades and military style weapons out of the hands of individual citizens and the question here is after some of these terrible massacres whether we want to do that with some of these weapons that to my mind doesn't involve self-defense. >> kate you go down this list. i was scanning this list looking at town hall.com and some other places. miss feinstein wants to get rid of rifle, shot guns, pistols as well as the semiautomatics. like i said at the open, a great cop, police chief bill braddon says it doesn't work you won't stop people. there are other things like universal registration and background checks but not this. there's no evidence to prove that this would work. >> that's the key point. what is her objective? does it have anything to do with reducing the incidents of
violent crime? no. her ban includes the most popular hand guns purchased today for self-defense. diane feinstein herself had a concealed weapons permit. she carried a concealed weapon before she was elected to the united states senate. right now we'll have women rising up all over the country who want to be able to protect themselves and their family with these semiautomatic handguns that have the capacity to fire more than five, six, seven round. you might need that. it is not up to the united states congress to ban the ability of individuals to defend themselves and you're right it wouldn't do any good. every time we start talking about measures to look at mentally ill and how we can improve enforcement and improve notification of those who are in danger the democrats change the story. >> i've read the article and read john lott's article. the evidence is not conclusive.
i want to ask senator hutchison, do you have a point of view on automatic weapons. you're down there in texas. texas is pretty much a pro gun place. if you were still in the senate how would you react to this? >> well, i think that the position that people take, and i think kate really stated it well, is that criminals are going to have guns and they will have anything available legal or not and if we're is going protect ourselves sometimes we talk only as if there are cities in america. but there are rural areas in america. there are places where you do need to have self-defense and i do think that you got to be very careful when you talk about banning different types of guns because many of them are for self-protection as well as hunting which we know is also a major pass time in many of our states. >> i mean, i just think -- i hear you, buddy, i know you're a
lawyer but she's in complete disregard of the law, prior supreme court decisions and the constitution. >> let me make just one point. kate and the senator both reflected this very common idea we hear that if the criminals are going to get a hold of the bad stuff then somehow we shouldn't be involved in banning it. this is a very dangerous and i would argue rather unamerican approach to criminal law. terrorists get ahold of explosive device and suicide bombs and they still continue to get ahold of them. it doesn't mean as a society well because some bad people got a hold of them we should never ban it. >> we have a healthy skepticism. it's reasonable -- >> there's a constitutional amendment that specifically talks about the right to keep and bear arms. that is unusual probably in the world but it is, i think, very important for not only militias
but individuals. >> there are other ways to go about this besides trying to ban all weapons which is what miss feinstein says. let me ask you quickly, bill braddon the top cop has said it's the ammunition clips, the magazines. that's something that worries him. he wants to see registration and licensing and he wants to see universal background checks and very tough criminal penalties for people who break gun laws. i've thrown a lot at you kate. can you buy into any of that? i think the nra can buy into that. >> the nra buys in to background checks and stiffer penalties and better reporting. what it doesn't buy into is this notion by the left that government is omni present, the police will always be able to defend you. there's a healthy skepticism among americans we need have the ability to defend ourselves because yes there are criminals who will always have weapons and
yes we do need to be able to defend fourselves for a variety of reasons and it's our right. >> how about a agree snad >> i can't buy a grenade. we're not talking about that. we're talking about a hand gun where it could fire more than one round. that's a semiautomatic weapon. that should be legal. that's what you all are talking about, an assault weapon? >> that's the problem with your argument. >> thank you all. we're come back. don't go anywhere. now we'll talk about some taxes. all right. get this. senate democrats are showing no shame as they plan to load up their very long awaited budget with plenty of new taxes, virtually no spending cuts. we'll have the latest on that. senator murray's memorandum breaks the case. we don't need more taxes, that's for sure. ♪
executor of efficiency. you can spot an amateur from a mile away... while going shoeless and metal-free in seconds. and you...rent from national. because only national lets you choose any car in the aisle...and go. you can even take a full-size or above, and still pay the mid-size price. now this...will work. [ male announcer ] just like you, business pro. just like you. go national. go like a pro. i hate to say this but i did tell you so. get this, senate democrats now promising to finally pass a budget. something they haven't done since 2009. however, an internal memo from new budget chair promises that tax hikes will be include.
there you go. hate to say it but i told you so. we're back with our panel. senator, go to you. even if they go with a simple majority of 50 votes plus vice president biden to get this thing through i'm going stand here or i'm sorry sit here and predict that the house republicans will veto it, stop it, stomp on it and we'll be nowhere. do you think this big tax hike could possibly get through? >> it will not get through the house. there's no doubt about it. remember the democrats do have 55 in the senate. and if they are able to get a 51 vote margin, they might be able to pass more taxes. but republicans say we have done the last tax increases that we're going to do. we need a pro growth formula that will create jobs in this country. and that isn't on anybody's agenda in the white house and
when i saw the reports of patty murray's memo i thought oh, my gosh why would you think that raising revenue is a way to create more jobs in this country? and republicans in the house will not do it. absolutely. >> so the question is why do it? if you know the gop will veto it and you know, why do it? what's the point? >> let me just say on policy i thought memo was great. i have it here with me. i thought it made all the case that needs be made for the democrats here on substance, which is that you have 2.4 trillion in spending cuts and we're on pace to have the lowest discretionary spending in 50 years. these are facts, these are numbers and that's why the democrats are feeling bullish. look there's a reason why the republicans in the white house caved on the debt ceiling. the public is not with them on these issues. >> don't know. kate, you have a little different view. i think republicans now back in the driver's seat because they cooperated on raising the debt
ceiling. they forced the senate democrats to put up a budget. the next thing will be the continuing resolution, short term spending cuts. i think the gop by stopping taxes is back in play, they are back in play. >> i love your optimism, larry. i wish i could be jumping up and down with you. but i'm afraid the republicans are in full retreat. i'm hoping -- i know they won't agree to this tax increase. the senator is absolutely right. but the problem is the democrats are using this as another opportunity to put republicans of throwing granny off the cliff, caring only about their millionaire and billionaire buddies. patty murray said we'll put it on the people who best can afford it. it worked for president obama, the democrats, like the cbs news political director said is to go for the jugular, to cut the throat to destroy republicans. this is not about achieving a budget or growing jobs. it's about destroying the opposition so they can continue
grow the size of the federal government, continue to increase deficits and debt so there's at some point no choice except to continue to raise taxes. >> senator, i'm less interested in this democratic tax budget. i want to ask you a question direct. will the spending sequester the automatic across the board spending cuts sequester go in. if you don't do anything on march 1st as you well know, it goes into place. 1.2 trillion roughly often years, hundred billion this year, to me the public wants lower spending. senator, will they get it? will the gop just say go on ahead dean it? -- ahead and dope it? -- ahead and do it? >> they are hemmed in by the recognize of the democrats again and again. the republicans do not want to cut defense spending. very concerned about what that's going to do. we got troops on the ground, in
harm's way. it's a terrible signal. but there are places that you can cut in the defense department. >> take it out of homeland security. take it out of homeland security. >> homeland security. >> they have the tsa. >> let me just tell you, ari just said we have lower discretionary spending in this country. what he also didn't say but is true is that it is entitlement spending that is eating us alive. everyone knows that we can reform social security and keep it vibrant for 75 years but also contain costs with a rational retirement age. we know medicare is going out of control. and if we don't do something about that, we will never get our budget house in order. >> you're right. i got to get out. the democrats will not put any of that in their budget, the president won't put that in his budget and it won't get done
this year. i'm hoping we do get the across the board spending cuts. we appreciate you all. let's get to the continuing crisis at boeing. the all-important 787 dreamliner now grounded for nine days and counting. the government says it's runaway overheating batteries that are causing some of the problems but they still don't know why this is happening. we're about to ask former mra airlines chief bob crandall and a public relations expert all about it. ♪
[ construction sounds ] ♪ [ watch ticking ] [ engine revs ] come in. ♪ got the coffee. that was fast. we're outta here. ♪ [ engine revs ] ♪ [ engine revs ] ...so as you can see, geico's customer satisfaction is at 97%. mmmm tasty. and cut! very good. people are always asking me how we make these geico adverts. so we're taking you behind the scenes. this coffee cup, for example, is computer animated. it's not real. geico's customer satisfaction is quite real though. this computer-animated coffee tastes dreadful. geico. 15 minutes could save you 15 % or more on car insurance. someone get me a latte will ya, please?
barrow island has got rare kangaroos. ♪ chevron has been developing energy here for decades. we need to protect their environment. we have a strict quarantine system to protect the integrity of the environment. forty years on, it's still a class-a nature reserve. it's our job to look after them. ...it's my job to look after it. ♪
it is really very hard to tell at this point how long the investigation will take. what i can tell you is that we have all hands on deck. we are working as hard as we can to identify what the failure mode is here and what corrective actions need to be taken. >> all right. so investigators still don't know what cause ad battery fire on board this airplane in boston earlier this month and that spells more bad news for boeing. the company's flagship dreamliner fleet now grounded for the past nine days. no end in sight, frankly. here now is former american airlines chairman bob crandall and jonathan salem baskin. mr. bob crandall it's a pleasure to see you, sir. happy new year. i want to ask you what the national transportation board said late this afternoon, okay. they looked at this battery.
they say it's a thermal runaway. which means accelerated temperature increases leading to short s short circuits. all this just gets hotter and hotter because there's something wrong with these batteries. how are they going fix this, when are they going fix this? >> larry, i'm not an jerenginee i'm an airline guy and the answer today is nobody knows how they will fix it. battery technology is sort of on the forefront of what we need to do better in the 21st century. boeing and the ntsb took this battery apart. there's eight cells in each battery. they took every cell apart. they are inspecting every piece of that battery with microscopes. everybody is working hard to try and find out what the problem is. now, it's a big problem. this is a big problem for boeing
and it's a big problem for the airlines. >> jonathan, you know, you got, again, this becomes an airplane problem. this is no longer just a public relations problem. besides this battery issue, might have been your notes, you got brake problems and fuel line problems. so this looks like a big mess to me now. you're in the public relations business. what do you think boeing ought to be doing or saying because they are not doing it and saying it. >> well -- >> go ahead, bob. >> go ahead, jonathan. you go ahead. >> again you got it right. it's not a battery problem or a brake problem or that they built these planes partly out of plastic. they have a reputation problem. this plane has been a problem for boeing for a couple of years. when we're told this is part of the growing up process and the tweaks that every plane encounters when it's first launched if you will, the problem is this plane came alive with a different prosaerks
wholly different approach than planes in boeing's past. let's say they fix the battery problem. so the ntsb says fine we resolved it there's still a lingering credibility and reputation issue which is what else is boeing not aware of because of this novel innovative construction process. going forward they have to figure out how to talk to more third parties, to affirm the veracity of what they are doing, get more transparent on the various metrics they are following in terms of various costs and issues they are encountering. if it's a different plane you got to communicate it differently. >> bob crandall there's a risk that there are other things boeing is not aware are of and the second risk is a reputational problem. how do you read that? >> larry, i read it in two ways. in the first place, every time you try a measured advance in technology in any field, all right, you're going to have things that you are not aware of. >> that's true. >> aviation, as you know,
aviation has had an unperilled safety record. the 787 have had various problems, valve, fuel has leaked through valves or one thing or another. aside from this battery problem, the kind of the level and the kind of problems that the 787 has had have been very modest considering the extent to which they have moved the technology forward. now, here we have a problem which is really not an aviation technology problem, it's a battery technology problem. and nobody knows, not the battery makers, not the ntsb, not the electrical engineers, nobody seems to know what is troubling these lithium-ion batteries. we need to solve that problem and they certainly need to solve it before they get the 787 back in the air. aside from that, the 787 problems have been very parallel to the teething problems of every new airplane. big problem, larry, i'm not trying to minimize it, big
problem for boeing, big problem firls but not unusual except for the battery problem. >> jonathan, how big of a financial problem will this be. will this affect boeing's borrowing costs, for example? how big of a money problem? >> insomuch as borrowing cost, insurance cost, risk management risk not to mention the whack they are take on the pricing for the 750 units of this plane they still haven't built and delivered. so the reputational costs could be significant and i just -- i disagree with bob who i think is a genius in so many ways. this isn't business as usual. this is a case history in the under side of innovation. when a company is endourjd do thinks in novel, smart, innovative ways it requires a different approach to how those are managed reported and understood to the various stakes holder groups. you have to manage your reputation. >> bob crandall, might it have
been better, i'll give the last word, might it have been better for boeing to do more testing before they put this thing out? >> larry, they did testing and testing and testing. if you look at the amount of testing that boeing has done, r, very difficult to do any more than they did. i think -- i think jonathan got it right in this sense, it's the underside of innovation. we want to encourage innovation. >> all right. i do want to encourage technology. bob crandall thanks. jonathan thanks. that's it nor for tonight's show. i'm larry kudlow. that's for watching. ♪ you know my heart burns for you... ♪